US Deserts the Liberal Line Reviewed work(s): Source: Economic and Political Weekly, Vol. 3, No. 3 (Jan.

20, 1968), pp. 182-183 Published by: Economic and Political Weekly Stable URL: http://www.jstor.org/stable/4358139 . Accessed: 25/01/2013 17:33
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January 20, 1968

ECONOMIC AND POLITICAL WELKLY investment abroad. Savings from this source are anticipated at $1 billion Loans extended abroad by American banks, government spending abroad (though nlot military expenditure ill the East) and American tourist travel outside the Western hemispheresaving on each of these is expected to be about $500 million. direct investment curbs axe The aimed most at Europe. No fresh invest. ment is to be allowed there or in other developed countries, but Britain, Canada, Australia, New Zealand and Japan may still expect new dollar investment annual. ly at 65 per cent of the 1965-66 level. Germany and Italy can absorb the blow to their payments surpluses but France will feel the tightening of screws siniceits payments have been in deficit of late. What marks out the 1968 package from that of 1964 is that unlike the interestequalisation tax which had expressly exempted developing countries, it wiil, in fact, operate arbitrarily on the developing countries. True, fresh direct investment in these countries can be 110 per cent of their 1965-66 level but (as opposed to Britain or Canada) 1965-66 was not a year of substantial dollar investment in the developing world. For India particularly, 1965-66 was not the best year for direct American private
investment.

would seem to confirm this view. It is also clear that taking advantage of the crisis faced by the UAR, countries like WHILE Gunnar Jarring is trying to Saudi Arabia want to have certaini evolve a formula for the restoration issues settled in their favour for all of durable peace in West Asia, politics time to come. Ihere is little doubt that in the Arab world is relapsing into the Saudi Arabia has not observed the pre-Khartoum pattern of internal con- terms of the Khartoum agreement and flicts. It is unlikely that the Arabs has given help to the Yemeni Royalists. will ever accept humiliating peace But progressive Arabs have to deter. terms but it is equally unlikely that mine their priorities. they can get honourable peace without It is impossible that the winds of a perceptible improvement in their change which are now sweeping the bargaining position. The presence of the Arab countries will leave Saudi Arabia, Soviet Navy in the Mediterranean is Yemen, Jordan or any other couintry an obvious new plus factor for the this issue be untouched and unchanged. On Arabs; if the sea had continued to of social transformation of the prea Western lake, Israel would have found modern nations, the Arabs can thlerefore military ventures much easier to undciWhat they cannot afford not solve afford to wait. take. But this by itself does is to allow Israel to get away wtAh the Arabs' problem. For, Israel holds the fruits of its aggression or even to large parts of their territory and Soviet retain them for long. The cost of conpower cannot be made available to tinued Israeli occupation can prove to them for a counter-offensive. be very heavy, even for the stoutest of The problem now is essentially one Arab regimes. There is no dearth of of using the United Nations and other extremists among the Arabs; the situaagencies to put pressure on Israel to tion can be exploited by them to diswithdraw. The position of Israel's credit secular and progressive leaders patrons has to be made to undergo a like Nasser. Recent events in Algeria great deal of change. If the Arabs can have shown that many of the Arab demonstrate that they are united in regimes are still extremely vulnerablefacing 'srael, even the United States The anger against Israel and the West cannot resist their legitimate demands can easily be given a little twist and for long. After all, for every one every turned into anger against the establishwhere what ultimately matters in West ed Arab governments. That would Asia is Arab friendship. It is significant make the task of the Arabs even more that the West European nations, par- difficult, but if this was a very imticularly France and Britain, are no portant consideration for poweflonger such ardent supporters of Israel. hungry political adventurists the quesThis cannot but have an impact on tion itself would not arise. American policy, unless the Arabs The Khartoum spirit, therefore, still fritter away their energies in mutual remains the Arabs' best hope and it recrimination and conflicts. is worthwhile for Arab leaders to take This, however, is precisely what they the initiative in restoring it. Tf Saudi seem to be doing now., With the summit Arabia is still unresponsive, they will conference cancelled, the Yemeni civil have to tread the other road. But that war escalated, and the Syrians con- road is too long and too arduous to tinuing to play the loud tune, Arab be anyone's first choice. solidarity does not appear any nearer than it was in the worst periods of inter-Arab conflict. It will not be suir- US Deserts the Liberal Line prisinig if both Israel and the United Johnson's new States view the situation with great UNDERSTANDABLY, to safeguard the par year measures satisfaction. to be compreIt is possible for belie vers in the value of the dollar had to hensive. The operation of the earlikr immutable laws of social conflict of the Kennedy assert that so long as feudal and reac- interest-equalisation tax Administration left many loopholes to tionary regimes persist in some parts firms have a of the Arab world, Arab unity and be plugged. International of ways for transferring funds solidarity will remain a fantasy. The variety axe this time regularity with which inter-Arab prob- across borders; hence the new have cropped up since the war has fallen most heavily on direct lems

Priorities for Arabs

With official aid tapering off, the US has been pressing India, directiy and through the IBRD and the IMF, to liberalise investment and fiscal policies to attract foreign private capital. Has the US then abandoned this line? US private investment in Asia and Africa is only a third to a fourth of ail US private investment abroad. So exempting the developing countries from the operation of the curbs on investment abroad would not have weighed too heavily on US balance of payments. But apparently American companies with subsidiaries in the developed world might resent the exemption of others who operate in the developing world. So this may be the US Administration's attempt at equity by spreading the hurt. The ceiling might operate arbitrarily in another way. To keep within the 110 per cent limit, it may be that a more viable major programme would have to be dropped and others, less economic, included. And, since investment in a project is not perfectly divi-

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ECONOMIC

AND

POLITICAL

WEEKLY

January 20, 1968

newspapers would have the public believe that economists in conclave shy away from practical realities to delve into theory. The simple disturbing trutl is that little of the discipline which economists are supposed to possess is evident at the conferences, regardless of whether the problems discussed are theoretical or practical. The absence of discipline spreads from the top dowitwards. What, except inertia and craving for hospitality, prevents the Economic Association from making its deliberations more useful and purposive? The presidential address of Professor M V Mathur had planning as its main theme, but said nothing on either the content or mechanism of planning. It set out in some detail the composition of various boards and committees to be set up at each level of the planning apparatus. This foray into the tempting field of administration left out the pay scales appropriate for each level in the hierarchy. Group discussion on food policy attracted the largest number of Veins of Un-discipline participants. Its proceedings would have done honour to an undergraduate ECONOMISTS often dilate upon thc debating society, with this difference cost-benefit nexus so fundamental to that the chairman could not treat the their science and seldom fail to -re- speakers or the hecklers as immature mind others of the crucial role of orga- students. Growth theories attracted the nisation. These sermons are forgotten more venturesome who sought to cover when they themselves get together. The the whole ground in a single session; annual all-India economic conferences nobody was clear in the end which have always been a convenient pro- brand was being peddled in what marfessional rendezvous, with a little bit ket. Incidence of taxation was discussed of genuine debate thrown in to justify in a much smaller group which merthe itinerary of participants from all cifully focussed its attention on a single over the country. Variety as betwetn paper which dealt with shifting of comconferences is determined largely by the pany taxation. Why does not the hospitality offered by th- Association set such specific topics and extent of hosts. The main useful function of the invite those who have worked on them conference has been to enable debuitants to submit papers for discussion, instead to make their bow but, of late, sub- of competing with the chapter headings mission of paners has been left almostl of approved textbooks in its search for exclusively to the 'outs'. Few care to conference subjects? read the papers in advance and discussion on the various subjects (which are announced a year in advance) is wholly The Inimitable Tangent spontaneous and extempore. This malaise has been known for a long THAT eoiled maroon turban alone time but those who offer solutions so would have set him apart in any gatherreadily for others' problems have ing except, as he always corrected, on sought none for their own. a railway platform. D G Karve, who died The golden jubilee session of the Economic Association in Madras last month was no turning point. It did little to relieve this set pattern and 'hat little consisted in specially getting a few dinosaurs to parade the extinction of their intellects. Charitable reports in
a few days back, could not be mistaken for anything other than a Poona intellectual, and yet he was different from the other Poona savants. His depth as a scholar was moderate and, in a city known for the longevity of its intellectuals, he died relatively young at 69.

sible over time, flows of capital to particular projects may be jerky in the attempt to keep within the annual ceiling. To take India's case, the coming years were expected to bring in substantial new foreign investmenit in the petrochemicals range. Though alternative sources of foreign finance may still be available from other industrial competitive countries, the room for bargaining between countries would be reduced. Second, with the American tendency to take Presidential appeals seriously, there is every chance that tourist travel might be considered 'antiAmerican'. Air India's trans-Atlantic traffic might suffer and the country s earnings, both official and non-official, from tourism may be reduced. Third, till now the US Administration's proposals for aid used to be generally pared down by the Congress, but now the Administration itself will initiate a smaller scale of aid.

The greater part of his life was spent in teaching but his forte was diplomatic tact. The mind was sharp and the expression smooth. There never was a yawn when he got up- to speak, though one did wonder at the end where exactly he stood, and why, on tne isSut; under debate - except when it concerned the co-operative movement to which he dedicated himself after retirement from teaching. Invariably, the right hand delved into the deep inside pocket of his long coat and brought out a pencil which he twirled between the hands till its return to the same pocket signalled the imminent stepping down. Those wrinkles girdling the eyes seemed to be the product not of age but of frequent laughter, which brought a rosy tint to the cheeks. If the business sessions of the Economic and Agricultural Economics Conferences had any colour or interest, it was largely in Karve's inimitable moving of the vote of thanks. Karve was the first senior academic economist drafted to New Delhi in the early fifties but he remained carefully aloof from the Planning Commission as Director of the Programme Evaluation Organisation, which was financed during his tenure by the Ford Fo-undation. Later, there was a stint as chairman of the Village and Small Industries Commission in 1955 w-hich framed the policy - largely negative and protectionist - for small and cottage industries in the Second Plan. The last high office he held was as Deputy Governor of the Reserve Bank in charge of agricultural credit. In a word, he could embellish the Establishment but, probably aware that he could not remould it, he preferred to remain tangential wherever he was. That touch and go of the tangent was finally manifest in the suddenness of his death. too.

Charan Singh's Shrewd Politics

ON the face of it the UP Chief Minister, Charan Singh, seemed to be unnecessarily adding to his troubies when, immediately in the wake of the rcsignation of the SSP and Communist ministers from his Government, he launched on a cabinet expansion-cuin1reshuffle. The move, he must have known, would seriously upset the Jan Sangh, the largest constituent of the 183

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